Sunday, October 21, 2018

Prieto's and Hall's Estimate of Solar EROI Is Very Outdated

Pedro Prieto and Charles Hall published a book a few years back entitled Spain's Photovoltaic Revolution. In that book they claim that solar PV has a drastically low EROI of less than 3. The reason for that low EROI is because Prieto and Hall calculate EROI differently from how it has generally been done. Prieto and Hall include things like labor expenses and first world salaries as energy investments (money is converted to energy by means of a formula). Those things are generally not included as energy investments for any sources of energy, but Hall and Prieto decided to include them for solar PV, drastically reducing its EROI all the way down to below 3.

However, that analysis is years old. Things change quickly in the field of solar PV. We must ask if that figure has improved. It is possible that the extended EROI of solar PV (including first world salaries) has improved considerably, not just because the EROI of the panels themselves has improved, but also because of improvements in foundations, frames, panel washing machines, and so on.

In this article, Prieto's and Hall's analysis will be repeated with more updated figures. This will be accomplished using monetary data taken from Lazard.

Prieto and Hall accomplished their task by adding up all the monetary expenses incurred by a solar PV plant, and then multiplying the resulting price by the energy intensity of the economy as a whole. This is what Prieto and Hall did for their PV plant in Spain and for the Spanish economy more generally. Their figures are summarized in a PDF presentation which Prieto gave recently (page 62).

I stress again that it's not necessary to track down and add up all these individual monetary expenses for a solar PV plant. That information is already available as the final levelized price of electricity for solar PV. Accountants have already added up all the monetary expenses for solar PV, along the entire supply chain, and have included all those expenses in the final levelized price. As a result, there is no purpose in duplicating the accountants' work and adding up prices for things like panel washing, security services, and so on.

Instead, we can easily re-calculate the extended energy investments for solar PV by just using the unsubsidized non-interest portion of the levelized price, then multiplying that price by the general energy intensity of the U.S. economy per dollar, similar to what Prieto and Hall did for Spain.

Let's do that procedure now. The levelized price of electricity for solar PV is $0.05/kwh (as per Lazard). If we assume half of that money is devoted to interest payments and energy investments already counted, that leaves $0.025/kwh for everything else. We can obtain an "energy intensity" for the entire U.S. economy by dividing the GDP by all energy usage, similar to what Hall and Prieto did for Spain. The US has a GDP of $19.39 trillion, and uses 97.7 Quads, which is 1.477 kwh/$1 (I just googled for those figures). Multiplying this by $0.025/kwh (from above) yields an uncounted energy investment of 0.037 kwh/kwh. If we assume an EROI of 14 for solar PV in a sunny region like Spain or the American Southwest, then the already-counted energy investment is 0.0714 (or 1/14), and the extended energy investment is 0.037 (above). Adding the two together yields a total extended energy investment of 0.108. Inverting this figure yields an extended EROI of 9.26 for solar PV in a sunny region.

That figure of 9.26 for an extended EROI is more than 3 times higher than the figure offered by Prieto and Hall, which was 3.0. At this point, we must ask why this newer estimate is so much higher.

Right away, it is clear that Prieto's solar plant is spending approximately 6x more money on these "extended" miscellaneous energy expenses than a more recent solar plant. Prieto uses a figure of 0.22 kwh/kwh for "extended" energy investments, which is 6x higher than the 0.037 figure we calculated above. In other words, the "miscellaneous" energy costs at Prieto's solar plant are vastly higher than at more recent solar plants.

The reason is fairly clear. Prieto's solar plant is a 1 megawatt solar plant, whereas newer plants are often 200 megawatts or larger. There is a large economy of scale when it comes to miscellaneous energy investments. Some of the energy investments which Prieto lists in his spreadsheet are fixed costs which would be reduced by a factor of 200 (per unit of energy delivered) for a larger plant. For example, a power plant which is 200x larger does not require 200 separate access roads leading to the plant, and so on.

Furthermore, the costs listed in Prieto's spreadsheet are also subject to improvement and "learning by doing" over time, even without any economy of scale. For example, washing solar PV panels could be done by a machine, rather than by hand, which could greatly reduce the monetary cost. Newer PV plants usually do not have fences or canals surrounding the plant. Fairs, exhibitions, promotions, and so on (which are significant energy investments in Prieto's spreadhsheet) could just be cancelled, since the novelty of a PV plant has worn off, and we don't need an opening exhibition for every new solar plant. The "premature phase out of manufacturing equipment", which Prieto counts as a massive energy investment, will presumably be done less frequently as the technology matures. And so on.

In conclusion. Prieto's and Hall's estimate of the extended EROI of solar PV is obsolete and outdated. It uses data from an old, very small solar PV plant. Newer plants are much larger and correspondingly benefit from an economy of scale. As a result, newer plants have much lower extended energy investments. An updated analysis yields an extended EROI of 9.26 for solar PV, not 3.0.

Afterword

One more thing. Prieto and Hall decided to include first world salaries, labor costs, and related discretionary energy expenditures as "energy investments", as mentioned above. Presumably, the same could be done for all other sources of energy. For example, if a Russian engineer at an oil company takes his whole family to the Bahamas, on a private jet rented with his salary, then that would count as an energy investment to obtain oil. In my opinion, those expenditures of energy should not be counted as energy investments.

However, those energy investments have been counted in this analysis. We have used to same method that Hall and Prieto used to estimate energy intensity, and have included labor, just as they did. The levelized cost of electricity from solar PV includes all labor costs along the entire supply chain, including first-world salaries for engineers, so it is included in the analysis above.

Still, such a broad definition of EROI made little difference. It reduced the EROI for solar PV from 14 to 9.26. In other words, the "extended" costs of solar PV have declined to such a degree that including them now makes only a modest difference.

Correction: The original version of this article contained an arithmetic mistake which I found several days after first posting it. The initial version of this post claimed an "uncounted" investment of 0.017 kwh/kwh, whereas the correct value is 0.037. This implies an extended EROI of 9.26 for the newer solar plant, not 11.32 as originally claimed.